Microvast Holdings, Inc.
For the period ended Sep 30, 2026. Filed Nov 9, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 9, 2026
MVST$0.62-1.8%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-10.
0001628280-26-055372
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0001628280-26-072316
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 136 previous paragraphs and 165 current paragraphs.
52 unchanged; 57 reworded; 51 added; 24 removed; 3 previous and 5 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (51)
Current report
Short-Term Strategy
Current report
Our near-term strategy is focused on preserving liquidity, addressing our significant near-term debt maturities and stabilizing our operations in response to the significant decline in revenue and gross margin that we experienced during the third quarter of 2026. As described under “Going Concern” below and in “Liquidity and Capital Resources,” substantial doubt exists about our ability to continue as a going concern, and management’s plans to alleviate that substantial doubt cannot be deemed probable. Based on our current cash flow forecasts, absent additional financing, the refinancing, extension or restructuring of our debt obligations, or significant further reductions in costs, we expect our available cash to be insufficient to meet our obligation as they come due over the next twelve months. Our near-term priorities include the following items.
Current report
Cost reduction, capital discipline and liquidity initiative
Current report
Refinancing and extension of near-term debt obligations
Current report
Our ability to meet our near-term debt obligations depends on our ability to refinance or extend them. These obligations include $41.7 million (RMB285 million) of convertible bonds issued by MPS to Huzhou Saiyuan due, together with accrued interest, on or before January 31, 2027, $84.0 million of short-term bank loans of our PRC subsidiaries maturing at various dates during the next twelve months and $14.5 million principal installments due within the next twelve months under MPS’s long-term working capital loans. We do not expect to be able to repay the convertible bonds on or before January 31, 2027 unless we are able to refinance or extend them. If we fail to repay the bonds when due, the applicable interest rate will increase to 12%, and Huzhou Saiyuan will have the right, within 60 days after the maturity date, to dispose of our pledged 12.39% equity interest in MPS in proportion to the amount of matured bonds or to convert the outstanding bonds into equity interests of MPS based on an entity value of MPS of $950.0 million. Either outcome would reduce our ownership interest in MPS, our principal operating subsidiary. A failure to repay the bonds when due will also constitute an event of default and trigger cross-defaults under our other debt arrangements.
Current report
Long-Term Strategy
Current report
We also continue to work towards advancement of our proprietary all-solid-state battery (“ASSB”) technologies, combining a liquid-electrolyte-free architecture with a non-porous, polyaramid-based solid electrolyte membrane. This platform is designed to support ionic transport and structural stability, with the potential to improve energy density and safety. Our bipolar architecture enables internal series connections within an integrated stack, offering flexible voltage configurations while potentially reducing external interconnections and simplifying battery system design. Recent laboratory studies have demonstrated progress in specific energy, cycle life, and bipolar integration. Selected prototypes showed no visible fire or smoke under the reported laboratory abuse-test conditions. We are also exploring silicon-sulfur chemistry for its potential to increase specific energy and provide partial compensation for electrode dimensional changes. Our solid-state and silicon sulfur batteries are currently at the early-stage prototype stage. The results described above are preliminary research and development data from separate prototypes, obtained under limited laboratory or test conditions. They are not commercial qualification results and remain subject to further validation, repeat testing, scale-up, customer qualification, manufacturing readiness and capital availability.
Current report
During the third quarter of 2026, we experienced a significant reduction in demand for our products, and our revenue for the three months ended September 30, 2026 decreased by 62.8% compared with the corresponding prior-year period. Our customers have continued to reduce their sales estimates and order volumes, and we currently have limited visibility into our revenue for the next several quarters. Our revenues are materially concentrated with a small number of customers, and there is significant uncertainty regarding the level of future orders from our largest customer after 2026. In addition, one of our significant European customers was recently acquired by a third party, which creates additional uncertainty regarding its future purchases from us. Any further reduction in demand, any loss of or reduction in orders from a significant customer or any failure to collect our significant amount of outstanding accounts receivable would further adversely affect our revenue, cash flows, and liquidity.
Current report
Installation and commissioning of the Phase 3.2 production equipment at our Huzhou, China facility have been completed. This Phase 3.2 line is designed to accommodate 48Ah, 53.5Ah, 55Ah, and 120Ah variants. Manufacturing process and product validation for the 120Ah cell have been completed. Production ramp-up remains ongoing and depends on customer demand, production yields, product qualification, operating efficiency, and working capital availability. Unless production volumes increase sufficiently, the Phase 3.2 line will operate below its designed capacity, and the associated costs of commissioning, ramp-up and underutilization may adversely affect our operating results and gross margin.
Current report
Future capacity expansions will require significant capital expenditures and corresponding investments in supporting infrastructure, working capital, sales and marketing, customer development, and quality control. We plan to assess expansion in light of medium- and long-term demand, customer commitments, available financing and expected returns. The financial benefit of additional capacity will depend on our ability to generate sufficient orders and shipments and operate facilities at efficient utilization levels.
Current report
Historically, our sales were primarily concentrated in the Asia & Pacific (“APAC”) regions. We have been expanding our presence in Europe and the U.S. to diversify our geographic sales mix and pursue opportunities in the electric vehicle and energy storage markets. We believe that sales in these markets may offer opportunities for higher average selling prices and gross margins compared with sales in China, as customers in these markets may place greater emphasis on application-specific performance requirements, certification, system integration, warranty expectations, and total cost of ownership, whereas the Chinese market is characterized by intense price competition among local battery manufacturers. However, higher average selling prices in these markets do not necessarily result in higher total revenue or gross margins; results also depend on sales volumes, product mix, pricing, customer requirements and the costs of serving each market. For the three months ended September 30, 2026, revenue decreased by more than 60% compared with the corresponding prior-year period, reflecting a decline in sales across markets. Our geographic expansion did not offset the overall decrease in sales during the period.
Current report
Our profitability may also be affected by our ability to effectively manage our manufacturing costs, maintain efficient production operations and achieve sufficient capacity utilization. Manufacturing costs are affected by fluctuations in raw material prices, supplier pricing, production volumes, manufacturing efficiency and the utilization of our production facilities. Increases in raw material and other production costs may adversely affect our gross margins if we are unable to pass these increases on to customers through higher selling prices or offset them through cost reductions and productivity improvements. Our ability to manage raw material costs also depends on our ability to negotiate favorable terms with suppliers and obtain reliable supplies at competitive prices.
Current report
Our manufacturing cost structure is also affected by changes in sales demand and production volumes. Higher production volumes may enable us to achieve economies of scale and improve the absorption of fixed manufacturing overhead costs. Conversely, lower-than-expected demand, reduced production volumes or underutilization of manufacturing capacity may increase fixed manufacturing overhead costs per unit, delay the realization of expected operating efficiencies and adversely affect our gross margins. In addition, competitive pricing pressures may limit our ability to pass increased costs on to customers.
Current report
Cost of Revenues and Gross Profit
Current report
Impairment Loss of Long-lived Assets. Impairment losses represent non-cash charges recognized under ASC 360 when the carrying amount of a long-lived asset group is not recoverable and exceeds its fair value. We evaluate property, plant and equipment for impairment when facts and circumstances indicate that the carrying values of such assets may not be recoverable. When evaluating for impairment, we first compare the carrying value of the asset group to the asset’s estimated future undiscounted cash flows. Potential impairment exists if the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the asset group. The impairment is determined by comparing the estimated fair value with the carrying value of the related asset group, and any excess amount by which the carrying value exceeds the fair value is recorded as an impairment in that period. The fair value of the asset group is estimated using a discounted cash flow model based on internal projections or a market value from the independent third-party appraisal. Property, plant and equipment assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
Current report
We are subject to income taxes in the U.S. and the foreign jurisdictions in which we do business, namely China, Germany and the U.K. These foreign jurisdictions have statutory tax rates different from those in the U.S. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws. We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S. Internal Revenue Service and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary. Any such adjustments could have a significant impact on our results of operations.
Current report
Income tax in China is generally calculated at 25% of the estimated assessable profit of our subsidiaries in China, except that two of our subsidiaries in China are qualified as “High and New Tech Enterprises” and thus enjoy a preferential income tax rate of 15%. The federal corporate income tax rate of 21% is applied for our U.S. entities. Our income tax in the U.K. is calculated at an average tax rate of 19% of the estimated assessable profit of our subsidiary in the U.K. The German enterprise income tax, which is a combination of corporate income tax and trade tax, is calculated at 29.1% of the estimated assessable profit of our subsidiary in Germany.
Current report
Our revenues for the three months ended September 30, 2026 decreased by $77.5 million, or 62.8%, compared to the same period in 2025. The decrease was primarily driven by a 62.2% reduction in sales volume from approximately 501.7 MWh for the three months ended September 30, 2025 to approximately 189.6 MWh for the same period in 2026. The decline reflected weaker sales across Europe and APAC as the result of softer end-market demand for heavy-duty trucks, port equipment, and heavy mining equipment, which led to reduced orders from several of our long-standing customers across Europe and APAC. Demand continued to be adversely affected by evolving commercial vehicle regulatory and geopolitical dynamics, including the Indian and Korean markets, and demand shifts towards lower cost products in India. The decrease in U.S. sales versus the prior year period was primarily due to our largest customer bringing product into 2025 as a result of uncertainty around tariff outcomes.
Current report
Cost of Revenues, Write-Down for Obsolete Inventories, and Gross Profit
Current report
Our gross profit margin was 5.2% for the three months ended September 30, 2026 compared to 37.6% in 2025. This change was primarily attributable to a $9.3 million write-down for obsolete inventories related to specialized ESS components and other inventories, which negatively impacted our gross margin by 20.4 percentage points. Excluding the impact of this non-cash charge, the decreased gross margin reflected the significant reduction in sales volume, and continued pricing pressure in the lithium battery industry. The decrease in revenue also reduced the absorption of fixed manufacturing and operating costs, further compressing gross margin.
Current report
General and administrative expenses for the three months ended September 30, 2026 increased by $2.6 million, or 14.7%, compared to the same period in 2025. This increase was primarily due to a provision of $5.1 million for a litigation settlement in connection with the Schelling Action, which the Company agreed to settle in principle. Under the Company’s insurance policy, the Company’s total retention is capped at $10.0 million, representing its self-insured retention, and the remaining costs and fees including any proposed settlement is covered by insurance. As of September 30, 2026, the Company had paid $4.9 million toward its self-insured retention and accrued the remaining $5.1 million. See Note 16 – Commitments and Contingencies for additional information.
Current report
Selling and marketing expenses for the three months ended September 30, 2026 decreased by $1.4 million, or 23.9%, compared to the same period in 2025. This decrease was primarily due to lower personnel costs.
Current report
The non-cash impairment charges of long-lived assets were $35.7 million for the three months ended September 30, 2026, primarily driven by a $15.0 million, $4.4 million, and $16.3 million impairment loss for our operations in China, Germany, and the U.S., respectively. The impairment amount was a result of impairment testing for all the production line assets and construction-in-progress assets, triggered by a material decline in sales, gross margin, and operating performance during Q3 2026.
Current report
For the three months ended September 30, 2026, we recorded income tax expenses of $5.4 million, compared to $739 thousand in the same prior year period. The increase was mainly due to a full valuation allowance against the $5.4 million deferred income tax assets, as it has been determined that it is no longer more likely than not that the deferred income tax assets will be utilized in the near future due to the material decline in sales, gross margin and increase in the operating loss and net loss in the current quarter.
Current report
Cost of Revenues, Write-Down for Obsolete Inventories, and Gross Profit
Current report
Our gross profit margin was 24.4% for the nine months ended September 30, 2026 compared to 36.6% in 2025. This change was primarily attributable to an $11.1 million write-down for obsolete inventories related to specialized ESS components and other inventories, which negatively impacted our gross margin by 5.7 percentage points. Excluding the impact of this non-cash charge, the decreased gross margin reflected the significant reduction in sales volume, changes in geographic markets, and continued pricing pressure in the lithium battery industry. The substantial decrease in revenue also reduced the absorption of fixed manufacturing and operating costs, further compressing gross margin.
Current report
General and administrative expenses for the nine months ended September 30, 2026 increased by $4.1 million, or 9.6%, compared to the same period in 2025. This increase was primarily due to a provision of $5.1 million for a litigation settlement, a $684 thousand increase in share-based compensation expenses and a $976 thousand increase in insurance fees, partially offset by a $1.3 million decrease in labor costs and a $2.7 million decrease in allowance for credit loss due to improved credit management. The litigation provision was incurred in connection with the Schelling Action, which the Company agreed to settle in principle. Under the Company’s insurance policy, the Company’s total responsibility for the litigation is capped at $10.0 million, representing its self-insured retention, and the remainder is covered by insurance. As of September 30, 2026, the Company had paid $4.9 million toward its self-insured retention and accrued the remaining $5.1 million.
Current report
Selling and marketing expenses for the nine months ended September 30, 2026 decreased by $1.6 million, or 9.7%, compared to the same period in 2025. The decrease was primarily due to a $1.4 million decrease in labor costs.
Current report
The non-cash impairment charges of long-lived assets were $35.8 million for the nine months ended September 30, 2026, primarily driven by a $15.1 million, $4.4 million, and $16.3 million impairment loss for our operations in China, Germany, and the U.S., respectively. The impairment amount was a result of impairment testing for all the production line assets and construction-in-progress assets, triggered by the material decline in sales, gross margin, and operating performance during Q3 2026.
Current report
For the nine months ended September 30, 2026, we recorded income tax expenses of $5.4 million, compared to $959 thousand in the same prior year period. The increase was mainly due to a full valuation allowance against the $5.4 million deferred income tax assets as it has been determined that it is no longer more likely than not that the deferred income tax asset would be utilized in the near future due to the material decline in sales, gross margin and increase in the operating loss and net loss during the quarter ended September 30, 2026.
Current report
As of September 30, 2026, we evaluated and concluded that the financial condition and operating results raised substantial doubt about our ability to continue as a going concern. We experienced a significant decline in revenue and gross margin during the third quarter of 2026, incurred a substantial operating loss, and continued to generate negative cashflow in operating activities. In addition, we had limited working capital and significant current debt obligations, including obligations that require refinancing or repayment during the assessment period. Based on our current cash flow forecasts, absent additional financing, the refinancing, extension or restructuring of our debt obligations, or significant further reductions in costs, we expect our available cash to be insufficient to meet our obligations as they come due over the next twelve months.
Current report
Our near-term debt obligations include: (i) $22.4 million (RMB149.9 million) of principal under the 2022 Facility Agreement entered into by MPS, our principal operating subsidiary in China, which was fully paid and retired subsequent to September 30, 2026; (ii) $41.7 million (RMB285 million) of convertible bonds issued by MPS to Huzhou Saiyuan, due, together with accrued interest, on or before January 31, 2027; (iii) $84.0 million of short-term bank loans of our PRC subsidiaries, each with an original maturity of 12 months or less, which mature at various dates during the next twelve months; and (iv) $373 thousand, $149 thousand, $13.8 million and $149 thousand of principal under MPS’s long-term working capital loans, due December 19, 2026, March 18, 2027, June 19, 2027 and September 18, 2027, respectively. Our ability to make these payments depends on our ability to refinance or extend these obligations, and while negotiation remain ongoing with our lenders regarding the refinancing or extension of our debt obligations, there can be no assurance that such negotiations will be successful. In particular, we do not expect to be able to repay the convertible bonds on or before January 31, 2027 unless we are able to refinance or extend them. If we fail to repay the bonds when due, the applicable interest rate will increase to 12%, and Huzhou Saiyuan will have the right, within 60 days after the maturity date, to dispose of our pledged 12.39% equity interest in MPS in proportion to the amount of matured bonds or to convert the outstanding bonds into equity interests of MPS based on an entity value of MPS of $950.0 million. Either outcome would reduce our ownership interest in MPS, our principal operating subsidiary. A failure to make any of these payments will result in an event of default under the relevant debt arrangement and in the acceleration of substantially all of our bank borrowings and bonds payable and the enforcement of security over MPS’s assets and our equity interest in MPS. See Note 6 – Bank Borrowings and Note 8 – Bonds Payable.
Current report
As of September 30, 2026, we had stockholders' equity of $472.8 million, including an accumulated deficit of $1,162.8 million, cash and cash equivalents of $84.8 million, of which $30.4 million was held by our Chinese subsidiaries and $14.4 million was held by our European subsidiaries, restricted cash of $39.6 million, total current assets of $352.7 million, and total current liabilities of $355.8 million, resulting in a working capital deficit of $3.1 million. Due to foreign regulatory restrictions, adverse tax consequences and localized working capital needs, we are currently unable to repatriate cash from China and Europe to fund our U.S. operations. We had current bank borrowings, notes payable and current bonds payable totaled approximately $196.0 million. Additionally, as of September 30, 2026, we had $34.7 million in purchase commitments primarily related to inventory, and $6.5 million in capital commitments with $5.6 million due within the next 12 months. Certain current assets, including restricted cash, accounts receivable and inventory, are not expected to be available to satisfy obligations as they become due.
Current report
For the three months ended September 30, 2026, we generated revenue of $45.8 million and a gross profit of $2.4 million, a significant decrease compared to $123.3 million revenue and $46.4 million gross profit in the same quarter last year. For the nine months ended September 30, 2026, net cash used in operating activities was $65.4 million, and cash, cash equivalents and restricted cash decreased by $44.8 million.
Current report
Furthermore, we currently have limited visibility into our revenue for the next several quarters and into cash collections in the near term, and our first quarter has historically reflected nominal reductions in activity related to the Chinese New Year holiday. Our revenues are also materially concentrated with a small number of customers, and there is significant uncertainty regarding the level of future orders from certain of our largest customers. There can be no assurance that we will collect these receivables when expected, or at all, or that our significant customers will maintain their current order levels.
Current report
•Implementing a focused commercial recovery plan to rebuild order intake and revenue visibility;
Current report
•Establishing an integrated sales-and-operations plan linking confirmed demand to production schedules, material purchases, labor, capacity utilization, and cash requirements;
Current report
•Pursuing refinancing of short-term bank borrowings as they mature. The Company secured $95.8 million from bank borrowing during the nine months ended September 30, 2026, of which $59.8 million represented refinanced debt. There can be no assurances that the Company will continue to be able to refinance the maturing short-term bank borrowing for the next twelve months on acceptable terms, or at all, and a refinancing plan cannot be deemed to be probable. As of September 30, 2026, the Company was in compliance with all material terms and covenants under its loan agreements, credit agreements, and bonds;
Current report
•Evaluating other financing alternatives. Financing sources available to the Company have been limited, and any financing that may be available in the near term is expected to be short-term in nature or subject to significant restrictions.
Current report
Short-Term Liquidity Requirements and Sources of Funds
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Removed paragraphs (24)
Previous report
We believe the energy storage industry is positioned for continued expansion. In 2025, third-party industry data shows that global power capacity grew by approximately 90 gigawatts, an estimated 23% increase from the previous year. Industry projections indicate expected further expansion, with an average CAGR in deployed gigawatts of 23% between 2025 and 2035. The U.S. and China are expected to lead this growth, with U.S. power capacity projected to increase from approximately 45 gigawatts in 2025 to approximately 125 gigawatts by 2030. By remaining positioned to refine our technology, we aim to advance our ESS solutions to meet the evolving demand of power sector and complement existing resources in meeting growing global demand for reliable and flexible power. We plan to leverage many of the component-level technologies from our commercial vehicle segment to develop our energy storage products.
Previous report
To support our product portfolio, we are building a second 2 GWh production line (Phase 3.2) at our Huzhou, China facility. The new Phase 3.2 line has been designed with flexible tooling and process architecture to accommodate multiple cell formats, including the 48Ah, 53.5Ah, 55Ah, and 120Ah variants. Installation and commissioning of the production equipment have been completed, and we anticipate continued capacity ramp-up during the second half of 2026. We believe this investment enhances our agile manufacturing capability and reinforces our commitment to delivering high-performance solutions across diverse application scenarios. Additionally, we have pilot lines utilized for prototyping and testing. Our Germany facility produces VDA modules.
Previous report
Future capacity expansions will require significant capital expenditures and will require a corresponding expansion of our supporting infrastructure, further development of our sales and marketing team, an expansion of our customer base and strengthened quality control. This capacity expansion will be carried out in a measured manner based on our ongoing assessment of medium- and long-term demand for our solutions.
Previous report
After initially being focused on the Asia & Pacific regions, we have expanded and continue to expand our presence and product promotion to Europe and the U.S. to capitalize on the rapidly growing electric vehicle market in those regions. As we continue to expand our geographic focus to Europe and the U.S., we believe sales of our products in Europe and the U.S. will have the potential to generate higher gross margins because average sales prices for customers in the U.S. and Europe are typically significantly higher than the average sales prices in China. It has been our experience that buyers in Europe and the U.S. are more motivated by application-specific performance requirements, certification, system integration, warranty expectations, and total cost of ownership, whereas in China we are faced with intense price competition from local battery manufacturers. Therefore, the geographic sources of our revenue will have an impact on our revenue and gross margins.
Previous report
Our profitability may also be affected by our ability to effectively manage our manufacturing costs. Our manufacturing costs are affected by fluctuations in the price of raw materials. If raw material prices increase, we will have to offset these higher costs either through price increases to our customers or through productivity improvements. Our ability to control our raw materials costs is also dependent on our ability to negotiate with our suppliers for a better price and our ability to source raw materials from reliable suppliers in a cost-efficient manner. In addition, we expect that an increase in our sales volume will enable us to lower our manufacturing costs through economies of scale.
Previous report
Other Income and Expenses
Previous report
Our revenues for the three months ended June 30, 2026 decreased by $4.1 million, or 4.5%, compared to the same period in 2025. The decrease was primarily driven by a $2.7 million tariff refund issued to a U.S. customer, which was recorded as a reduction to our revenue in the current period.
Previous report
Our cost of revenues for the three months ended June 30, 2026 increased by $1.9 million, or 3.1%, compared to the same period in 2025, primarily driven by higher raw material prices during the first half year of 2026, partially offset by a one-time $4.3 million recognition of tariff refunds.
Previous report
Our gross profit margin was 29.5% for the three months ended June 30, 2026 compared to 34.7% in 2025. The decrease in gross margin was primarily due to higher raw material prices and lower production utilization, which reduced fixed cost absorption, slightly offset by the one-time recognition of the tariff refunds.
Previous report
General and administrative expenses for the three months ended June 30, 2026 increased by $2.7 million, or 24.2%, compared to the same period in 2025. This increase was primarily due to a $2.6 million increase in legal and other professional service fees.
Previous report
Selling and marketing expenses for the three months ended June 30, 2026 increased by $1.3 million, or 38.5%, compared to the same period in 2025. This increase was primarily due to a $1.5 million increase in service fees associated with customer retention initiatives, partially offset by a decrease in personnel costs.
Previous report
Provision for Income Taxes
Previous report
Provision for income taxes for the three months ended June 30, 2026 was nil as compared to a provision of $220 thousand for the comparable prior year period. No provision for income taxes in the current quarter was mainly due to the absence of taxable income and changes in deferred tax balances resulted in no material income tax expense or benefit.
Previous report
Our gross profit margin was 30.4% for the six months ended June 30, 2026 compared to 36.0% in 2025. The decrease in gross margin was primarily due to higher raw material prices, and lower production utilization, which reduced fixed cost absorption, slightly offset by recognition of the tariff refunds.
Previous report
General and administrative expenses for the six months ended June 30, 2026 increased by $1.5 million, or 6.0%, compared to the same period in 2025. This increase was primarily due to a $4.0 million increase in legal and other professional service fees, partially offset by a $3.1 million decrease in allowance for credit loss due to improved credit management.
Previous report
Selling and marketing expenses for the six months ended June 30, 2026 decreased by $138 thousand, which was stable compared to the same period in 2025.
Previous report
Provision for Income Taxes
Previous report
Provision for income taxes for the six months ended June 30, 2026 was nil as compared to a provision of $220 thousand for the comparable prior year period. The Company did not general taxable income and there was no material deferred tax expenses or benefit in the first half year of 2026.
Previous report
As of June 30, 2026 and through the issuance date of these financial statements, our forecast has been significantly
Previous report
impacted by developments including: (1) the 28.8% decrease in revenue and the 24.3% reduction in sales volume from approximately 947.2 MWh to approximately 717.2 MWh, driven by evolving regulatory and geopolitical dynamics including in the Indian and Korean markets, a demand shift toward lower-cost products in India, and OEM platform ramp-up delays in Europe and APAC; (2) the decline in gross margin from 36.0% to 30.4% due to higher raw material prices and lower production utilization, and a moderation in global electric vehicle demand growth driven by the expiration of government incentive programs and shifting regulatory frameworks; (3) the change from $44.3 million of cash generated by operating activities in the prior-year period to $33.3 million used in operating activities, an unfavorable change of $77.6 million; (4) the concentration of near-term maturities, with $104.2 million of our $118.6 million of borrowings due within the next 12 months; and (5) constrained access to capital, including that equity market conditions and business performance have rendered equity funding unfavorable as a primary liquidity mechanism and that cash held by our Chinese and European subsidiaries cannot currently be repatriated to fund our U.S. operations due to foreign regulatory restrictions and adverse tax consequences. As a result, we expect to continue to incur operating losses and negative operating cash flows, further reducing liquidity and increasing reliance on external sources of capital. These conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.
Previous report
•Evaluating additional financing alternatives, including potential capital raising transactions and strategic opportunities.
Previous report
Although no additional binding financing agreements have been entered into, the Company remains engaged in discussions with third parties to explore further capital-raising opportunities. Future capital requirements may change based on business developments, market conditions, and liquidity needs. The Company continues to evaluate potential options, including equity offerings and debt financing, to provide financial flexibility and long-term growth.
Previous report
Cash Flows from Operating Activities
Previous report
Cash Flows from Investing Activities
Reworded paragraphs (57)
Previous wording
References in this Report to the “Company,” “Microvast Holdings, Inc.,” “Microvast,” “our,” “us” or “we” refer to Microvast Holdings, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the interim consolidated financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. See the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and in Part II, Item 1A of this Quarterly Report for further discussion of the risks and uncertainties that could affect our business, financial condition and results of operations.
Current wording
References in this Quarterly Report on Form 10-Q (this “Report”)to the “Company,” “Microvast Holdings, Inc.,” “Microvast,” “our,” “us” or “we” refer to Microvast Holdings, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the interim consolidated financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. See the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and in Part II, Item 1A of this Quarterly Report for further discussion of the risks and uncertainties that could affect our business, financial condition and results of operations.
Previous wording
Founded in 2006 and headquartered in Houston, Texas, Microvast Holdings, Inc. (NASDAQ: MVST) strives to be a global leader in advanced specialized battery technologies. Since our public listing in 2021, we have focused on delivering high-performance lithium-ion battery solutions for the next generation of commercial and industrial electrification. We specialize in the design, development, and manufacturing of battery components and systems primarily for electric commercial vehicles and energy storage systems (“ESS”). We have recently aligned our commercial priorities and resources to focus on selected near-term opportunities in the commercial vehicle market, while continuing to evaluate future opportunities in the ESS market. Our guiding principle is to innovate lithium-ion battery designs from the ground up without relying on legacy technologies. We believe that this approach allows us to create purpose-built solutions for new markets, rather than repurposing existing ones.
Current wording
Founded in 2006 and headquartered in Houston, Texas, Microvast Holdings, Inc. (NASDAQ: MVST) strives to be a global leader in advanced specialized battery technologies. Since our public listing in 2021, we have focused on delivering high-performance lithium-ion battery solutions for the next generation of commercial and industrial electrification. We specialize in the design, development, and manufacturing of battery components and systems primarily for electric commercial vehicles and energy storage systems (“ESS”). We have recently aligned our commercial priorities and resources to focus on selected near-term opportunities in the commercial vehicle market. Our guiding principle is to innovate lithium-ion battery designs from the ground up without relying on legacy technologies. We believe that this approach should allow us to create purpose-built solutions for new markets, rather than repurposing existing ones.
Previous wording
Our mission is to become a leader in U.S. domestic battery production, reducing reliance on overseas suppliers, and strengthening national energy independence. We believe that this mission, along with our engineering expertise, vertically integrated business model, and our focus on continuous investment in our research and development and operations, differentiates us from competitors and positions us for long-term revenue and income growth.
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Our mission is to become a leader in U.S. domestic battery production, reducing reliance on overseas suppliers, and strengthening national energy independence. We believe that this mission, along with our engineering expertise, vertically integrated business model, and our investment in our research and development and operations, differentiates us from competitors.
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We employ a vertically integrated approach, which we believe provides a competitive advantage in optimizing performance and cost. Our proprietary technology stack spans the entire battery system, including the core cell materials (cathode, anode, electrolyte, and separator), cells, modules, packs, thermal management systems, and intelligent battery management systems. This end-to-end expertise has driven critical advancements in ultra-fast charging, high energy density, long cycle life, and safety, all critical factors for commercial transportation and ESS applications. With significant in-house capabilities in design, testing, and R&D, we continue to strive to build an industry-leading body of knowledge in battery chemistry and performance.
Current wording
We employ a vertically integrated approach, with our proprietary technology stack spanning the entire battery system, including the core cell materials (cathode, anode, electrolyte, and separator), cells, modules, packs, thermal management systems, and intelligent battery management systems. This end-to-end expertise has driven advancements in ultra-fast charging, high energy density, long cycle life, and safety, all critical factors for commercial transportation and ESS applications. With in-house capabilities in design, testing, and R&D, we strive to build an industry-leading body of knowledge in battery chemistry and performance.
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•Implementing operating cost reduction initiatives and reducing or deferring certain discretionary capital expenditures;
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We are implementing operating cost reduction initiatives across all areas of the business and are reducing or deferring certain discretionary capital expenditures, in addition to implementing a targeted reduction in workforce in certain of our operations. Additionally, we are exploring all potential options to address our liquidity position, including potential asset sales. However, there can be no assurance that any asset sale will be completed. As of the date of this Quarterly Report, our liquidity initiative and cost-reduction program have not been fully implemented, and the cash costs associated with any such actions have and may continue to strain our near-term liquidity.
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•Pursuing refinancing of short-term bank borrowings as they mature; and
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We are negotiating extensions or restructurings of debt obligations within our China operating entities and pursuing the refinancing of short-term bank borrowings as they mature, and while negotiations remain ongoing with our lenders regarding the refinancing or extension of our debt obligations, there can be no assurance that such negotiation will be successful. During the nine months ended September 30, 2026, we secured $95.8 million of bank borrowings, of which $59.8 million represented refinanced debt. However, it cannot be deemed probable that any refinancing or extension will be available on acceptable terms, or at all, and a failure to make any of these payments when due will result in an event of default and could result in the acceleration of substantially all of our bank borrowings and bonds payable and the enforcement of security over MPS’s assets and our equity interest in MPS. See Note 6 – Bank Borrowings and Note 8 – Bonds Payable to the consolidated financial statements.
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Our objective is to drive long-term stakeholder value by scaling our proprietary battery technologies across high-growth sectors. Since 2008, our research and development efforts have been dedicated to pioneering cutting-edge battery technologies that offer ultra-fast charging, extended cycle life, high energy density, and enhanced safety. Our commitment to innovation has well positioned us in developing the next-generation of lithium-ion batteries. We are focused on designing battery technologies for use primarily on electric commercial vehicles and remain committed to advancing ESS in the future. We believe our solutions empower industries to transition to cleaner, more efficient power sources, unlocking new levels of performance, longevity, and cost efficiency. Historically, demand for electric commercial vehicle batteries was concentrated in the Asia & Pacific regions. We are now working towards a balanced global strategy throughout Europe and North America. As customer demand for our products and services has grown in Europe and the U.S., we have expanded to meet these growth opportunities. We continue to invest in our operations in Asia-Pacific to capitalize on regional growth. This provides a balanced global strategy while maintaining strong partnerships with original equipment manufacturers (“OEMs”) in high-demand markets. We have primarily supplied our battery solutions to OEMs for use in electric commercial and specialty vehicles. We are continuously advancing our battery technologies to improve performance, efficiency, and reliability in commercial applications.
Current wording
Assuming we are able to address our near-term liquidity requirements and alleviate the substantial doubt about our ability to continue as a going concern, our long-term objective is to drive stakeholder value by scaling our proprietary battery technologies across high-growth sectors. Since 2008, our research and development efforts have been dedicated to pioneering cutting-edge battery technologies that offer ultra-fast charging, extended cycle life, high energy density, and enhanced safety. We are focused on designing battery technologies for use primarily on electric commercial vehicles and remain committed to advancing ESS in the future. We believe our solutions may empower industries to transition to cleaner, more efficient power sources, unlocking new levels of performance, longevity, and cost efficiency. Historically, demand for electric commercial vehicle batteries was concentrated in the Asia & Pacific regions. Over time, we are working towards a balanced global strategy throughout Europe and North America. We have expanded our capabilities to serve customers in Europe and the U.S. while maintaining operations in Asia-Pacific. Further investment will depend on customer demand, product qualification, manufacturing utilization, and available capital. We seek to maintain relationships with original equipment manufacturers (“OEMs”) in our target markets. We have primarily supplied our battery solutions to OEMs for use in electric commercial and specialty vehicles.
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In accordance with Accounting Standards Codification (“ASC”) Topic 205-40, Going Concern, we evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. This evaluation initially does not consider the potential mitigating effect of management's plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans to the extent it is probable that 1) the plans will be effectively implemented within one year after the date the financial statements are issued, and 2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt. Given the uncertainties described in Note 1 to the unaudited consolidated financial statements of this Quarterly Report and in this Management's Discussion and Analysis of Financial Condition and Results of Operations, we have concluded that substantial doubt exists about our ability to continue as a going concern within one year after the date the financial statements are issued and that management's plans to alleviate the substantial doubt cannot be deemed probable, and thus the substantial doubt about our ability to continue as a going concern has not been alleviated.
Current wording
In accordance with Accounting Standards Codification (“ASC”) Topic 205-40, Going Concern, we evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued. This evaluation initially does not consider the potential mitigating effect of management's plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans to the extent it is probable that 1) the plans will be effectively implemented within one year after the date these financial statements are issued, and 2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt. Given the uncertainties described in Note 1 to the unaudited consolidated financial statements of this Quarterly Report and in this Management's Discussion and Analysis of Financial Condition and Results of Operations, we have concluded that substantial doubt exists about our ability to continue as a going concern within one year after the date these financial statements are issued and that management's plans to alleviate the substantial doubt cannot be deemed probable, and thus the substantial doubt about our ability to continue as a going concern has not been alleviated.
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Key Factors Affecting Our Performance
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Key Operating Factors Affecting Our Performance
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Our future success depends on several critical factors, including those outlined below. While these represent opportunities for growth, they also pose challenges and risks that we must effectively manage to sustain our business momentum and improve financial performance.
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Assuming we are able to alleviate our going concern status, our future success depends on several critical factors, including those outlined below. While these represent opportunities for growth, they also pose challenges and risks that we must effectively manage to sustain our business momentum and improve financial performance.
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Our financial performance is driven by development and sales of new products with innovative technology. Our ability to develop innovative technology has been and will continue to be dependent on our dedicated research team. We plan to continue expanding our R&D presence in the U.S. We also plan to continue leveraging our knowledge base in our overseas locations, including China and to continue expanding our R&D efforts on a global basis. We expect our results of operations will continue to be impacted by our ability to develop new products with improved performance and reduced ownership cost as well as the cost of our R&D efforts.
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Our financial performance is driven by development and sales of new products with innovative technology. Our ability to develop innovative technology has been and will continue to be dependent on our dedicated research team. We plan to draw on our R&D capabilities in the U.S. and our overseas locations, including China. R&D expenditures affect our operating expenses, while the timing and success of product development, validation, and commercialization may affect our ability to secure customer orders and generate revenue.
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We have launched the 290Ah lithium iron phosphate (“LFP”) cell-based battery packs as high-performance, modular battery solutions designed for a wide range of commercial and heavy-duty industrial applications. These packs leverage our next generation LFP cell technology to provide scalable configurations and enhanced safety profiles for the diverse operating environments required by fleets.
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We have developed the 290Ah lithium iron phosphate (“LFP”) cell-based battery packs as modular battery solutions designed for a range of commercial and heavy-duty industrial applications. These packs use our LFP cell technology to provide scalable configurations and safety features for the operating environments required by fleets.
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Utilizing this underlying 290Ah LFP technology, we have also launched the KAF™ electric powertrain solution. Designed as an integrated vehicle-level system targeted for the U.S. school bus market, the KAF™ electric powertrain combines high-voltage battery packs with a proprietary nitrogen purging safety system and key traction drive components. This architecture is intended to simplify OEM integration, reduce total deployment cost, and address thermal propagation concerns in the segment. Commercialization of the KAF™ platform and associated 290Ah LFP products remain subject to final product validation, vehicle-level integration with OEM partners, customer qualification, and availability of domestic manufacturing capacity and capital. For specific drive train components, we plan to partner with mature and high volume suppliers to source and develop this integrated solution.
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We have also explored the possibility of introducing the KAF™ electric powertrain platform concept, based on the 290Ah LFP platform and targeted at the U.S. school bus market. The platform is designed to combine high-voltage battery packs, a nitrogen purging design, and selected traction drive components. It is intended to simplify OEM integration and reduce deployment cost. The effectiveness of the nitrogen purging design and other safety measures must be evaluated in the target battery pack configuration. Commercialization of the KAF™ platform and associated 290Ah LFP products remains subject to significant testing, product prototype development and final product validation, vehicle-level integration with OEM partners, customer qualification, and the availability of domestic manufacturing capacity and capital. We plan to work with suppliers for selected traction drive components and the final supply scope and interfaces will be determined for individual OEM programs.
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Our revenue and profitability depend substantially on the demand for battery systems and battery components, which is driven by the growth of the commercial and specialty electric vehicle markets and the energy storage markets. Many factors contribute to the development of the electric vehicle and battery energy storage sector, including product innovation, general economic and political conditions, environmental concerns, energy demand, government support and economic incentives (e.g., the IRA in the U.S. and the E.U. Green Deal, E.U. Fit for 55). While governmental economic incentives and mandates can drive market demand for the markets in which we operate and, as a result, battery systems and components, governmental economic incentives can always be gradually reduced or eliminated. These incentives are subject to evolving geopolitical dynamics, including Foreign Entity of Concern restrictions and domestic content requirements. We continuously monitor these shifts, as any reduction, elimination, or disqualification from such incentives could adversely affect demand for our products and our financial performance.
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Our revenue and profitability depend substantially on the demand for battery systems and battery components, which is driven by the growth of the commercial and specialty electric vehicle markets and the energy storage markets. Many factors contribute to the development of the electric vehicle and battery energy storage sector, including product innovation, general economic and political conditions, environmental concerns, energy demand, government support and economic incentives (e.g., the IRA in the U.S. and the E.U. Green Deal, E.U. Fit for 55). While governmental economic incentives and mandates can drive market demand for the markets in which we operate and, as a result, battery systems and components, governmental economic incentives can always be gradually reduced or eliminated, such as the phase-out of certain regional clean energy subsidies previously received by our Chinese subsidiary. These incentives are subject to evolving geopolitical dynamics, including Foreign Entity of Concern restrictions and domestic content requirements. We continuously monitor these shifts, as any reduction, elimination, or disqualification from such incentives has and could continue to adversely affect demand for our products and our financial performance.
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Our ability to scale depends on the timely expansion of our manufacturing footprint. As of June 30, 2026, our order backlog was primarily composed of long-term transit and logistics partners in Europe. To address this demand, we have utilized our capital resources to strategically expand our global production capabilities.
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Our ability to scale our business and meet customer demand depends on the effective utilization of our existing manufacturing capacity and on the timely expansion of our manufacturing footprint. As of September 30, 2026, our order backlog was primarily composed of long-term transit and logistics partners in Europe. The timing of revenue recognition from this backlog depends on production readiness, customer delivery schedules, product qualification, and other contractual requirements. If production volumes are below levels needed to absorb fixed manufacturing overhead, unit costs may increase and gross margins may be adversely affected.
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In 2023, we successfully completed the 2 GWh cell, module, and pack production line (Phase 3.1) for our 53.5Ah cell technology at our Huzhou, China facility. This Phase 3.1 line has been operating safely and efficiently, providing a stable manufacturing base. In addition to the 53.5Ah cell, this line also supports the production of our 48Ah and 55Ah cells.
Current wording
In 2023, we completed the 2 GWh cell, module, and pack production line (Phase 3.1) at our Huzhou, China facility for our 53.5Ah cell technology. This Phase 3.1 line also supports the production of our 48Ah and 55Ah cells. In addition, we have pilot production lines used for prototyping and testing, and our Germany facility produces VDA modules. Actual production depends on production mix, customer demand, equipment availability, and manufacturing yield.
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Construction and equipment installation for our U.S. facility was suspended in the second quarter of 2024 due to funding constraints. We have since pivoted the site's strategic focus from nickel manganese cobalt production to LFP batteries. Towards the end of 2025, we made a targeted investment in our Clarksville facility to establish a pack assembly line, expanding our domestic capabilities and supporting anticipated customer demand. We financed this investment through cash generated from our operating activities. Resumption of full-scale construction is contingent upon securing additional financing or strategic partnerships. Once completed, Clarksville is intended to be a vertically integrated hub for LFP cell and ESS container assembly, satisfying domestic content preferences for the U.S. market.
Current wording
Construction and equipment installation for our U.S. facility was suspended in the second quarter of 2024 due to funding constraints. We have since pivoted the site's strategic focus from nickel manganese cobalt production to LFP batteries. Towards the end of 2025, we made a targeted investment in our Clarksville facility to establish a pack assembly line, expanding our domestic capabilities and supporting anticipated customer demand. The pack assembly line is substantially completed. Resumption of full-scale construction remains contingent upon securing additional financing or strategic partnerships. Unless additional funding is secured and construction resumes, our ability to establish the planned cell manufacturing capacity and vertically integrated ESS container assembly operations at the site will remain limited. If the project is delayed further or additional financing cannot be obtained on acceptable terms, we may be unable to realize the expected operational benefits of the facility, and additional capital investment may be required before the planned operations can commence.
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The battery industry is subject to stringent and evolving environmental regulations, particularly concerning hazardous waste management, pollution control, and sustainability requirements. Over time, these regulations have become increasingly strict, impacting both product costs and gross margins. In the U.S., newly proposed RCRA universal waste regulations for lithium batteries are expected to be finalized by the EPA as early as August 2027, which would create a new waste category specifically for lithium batteries and establish new requirements for transportation, handling, and storage.
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The battery industry is subject to stringent and evolving environmental regulations, particularly concerning hazardous waste management, pollution control, and sustainability requirements. Over time, these regulations have become increasingly strict, impacting both product costs and gross margins. In the U.S., the EPA intends to propose RCRA universal waste regulations for lithium batteries, which are expected to be finalized by the EPA as early as August 2027, and would create a new waste category specifically for lithium batteries and establish new requirements for transportation, handling, and storage. Also in the U.S., legislation known as the BRACE Act, which would require the EPA to establish a universal waste category for lithium batteries and would modify and modernize the recycling of spent lithium-ion batteries, passed the House in September 2026. It has not been signed into law. In Europe, Regulation 2023/1542 imposes requirements across the battery life cycle. Beginning February 18, 2027, EV and industrial batteries above 2 kWh placed on the European market must carry a digital battery passport, and batteries without one may not lawfully be placed on the market. Supply chain due diligence obligations apply from August 18, 2027, and carbon footprint declarations will be required for each battery model and manufacturing plant once the European Commission adopts a calculation methodology. Failure to timely comply could delay deliveries, increase compliance costs or adversely affect demand for our products. Compliance with these standards requires continuous investment in manufacturing processes, material sourcing, and waste disposal practices to ensure adherence to environmental mandates across multiple jurisdictions.
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Additionally, government policies and economic incentives play a critical role in shaping demand for the EV and ESS markets. Incentives such as EV purchase subsidies, tax credits for battery manufacturers, and renewable energy project grants have historically supported market growth. Similarly, carbon emission penalties and fleet-wide regulatory requirements for automakers further drive the adoption of zero-emission transportation and clean energy solutions. These policies expand our total addressable market, creating opportunities for increased sales and broader adoption of our battery technologies. However, changes in these incentives—such as reductions or eliminations of subsidies—could negatively affect demand for our products.
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Additionally, government policies and economic incentives play a critical role in shaping demand for the EV and ESS markets. Incentives such as EV purchase subsidies, tax credits for battery manufacturers, and renewable energy project grants have historically supported market growth. Similarly, carbon emission penalties and fleet-wide regulatory requirements for automakers further drive the adoption of zero-emission transportation and clean energy solutions. These policies expand our total addressable market, creating opportunities for increased sales and broader adoption of our battery technologies. However, changes in these incentives—such as the reduction of the subsidies received by our Chinese subsidiary and elimination of certain battery products export value-added tax rebate effective January 1, 2027 in China—has and could continue to adversely affect demand for our products.
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As a global company with operations and sales in China, the Asia-Pacific region, Europe, and the U.S., we are also exposed to trade policies, tariffs, and regulatory shifts that could impact our ability to meet projected sales and maintain profit margins. Any significant changes in international trade agreements, supply chain restrictions, or geopolitical tensions may influence production costs, material sourcing, and cross-border sales strategies. Changes in tariff policy in particular, whether threatened or implemented, may raise costs for consumers which could lead to softened consumer demand. For example, on July 23, 2026, the current presidential administration of the United States announced the imposition of 10% - 12.5% tariffs on imports from sixty economies under Section 301 of the Trade Act of 1974. The current situation with respect to tariff policy is dynamic, and the ultimate effect will be dependent on the magnitude and duration of the tariffs, the outcome of litigation, and the countries implicated, as well as our ability to mitigate their impact.
Current wording
As a global company with operations and sales in China, the Asia-Pacific region, Europe, and the U.S., we are also exposed to trade policies, tariffs, and regulatory shifts that could impact our ability to meet projected sales and maintain profit margins. Any significant changes in international trade agreements, supply chain restrictions, or geopolitical tensions may influence production costs, material sourcing, and cross-border sales strategies. Changes in tariff policy in particular, whether threatened or implemented, may raise costs for consumers which could lead to softened consumer demand. For example, as of July 24, 2026, the current presidential administration of the United States imposed 10% - 12.5% tariffs on imports from sixty economies under Section 301 of the Trade Act of 1974. Products of China are subject to the 12.5% rate, which applies in addition to existing Section 301 tariffs on Chinese-origin goods. The tariffs are currently being challenged in an ongoing court case before the U.S. Court of International Trade. The current situation with respect to tariff policy is dynamic, and the ultimate effect will be dependent on the magnitude and duration of the tariffs, the outcome of litigation, and the countries implicated, as well as our ability to mitigate their impact.
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We derive revenue from the sales of our electric battery products and components to the commercial vehicle market. While historically concentrated in the Asia-Pacific region, our revenue mix has shifted significantly toward Europe which accounted for the largest portion of our revenue mix for the six months ended June 30, 2026 and 2025. This shift reflects our strategy to capture higher-margin opportunities in the European commercial vehicle sectors.
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We derive revenue from the sales of our electric battery products and components to the commercial vehicle market. During the three and nine months ended September 30, 2026 and 2025, our revenue was generated across multiple geographic regions, including Europe, which accounted for the largest portion of our revenue mix, Asia-Pacific, and the U.S.
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We issued $2.7 million tariff refunds to U.S. customers in May 2026. Before the tariff refunds were recorded as a reduction to our revenue in the current period, a total of $931 thousand and $1.2 million in revenue was realized in the United States for the three months and six months ended June 30, 2026, respectively. The following table sets forth a breakdown of our net revenue by major geographic regions, based on the locations of our customers, for the periods indicated (in thousands, except percentages):
Current wording
We issued $2.7 million in tariff refunds to U.S. customers, which were recorded as reductions to our revenue. Before the tariff refund reductions, a total of $5.7 million in revenue was realized in the United States for the nine months ended September 30, 2026. The following table sets forth a breakdown of our net revenue by major geographic regions, based on the locations of our customers, for the periods indicated (in thousands, except percentages):
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Our revenues for the three and six months ended June 30, 2026 were materially concentrated with a small number of customers. The composition of our largest customers has historically varied from period to period, and the level of revenue concentration with any individual customer has fluctuated, in some cases significantly, between reporting periods.
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Our revenues for the three and nine months ended September 30, 2026 were materially concentrated with a small number of customers. The composition of our largest customers has historically varied from period to period, and the level of revenue concentration with any individual customer has fluctuated, in some cases significantly, between reporting periods.
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General and Administrative Expenses. G&A expenses primarily comprise personnel-related costs for our executive, legal, finance, human resources, and IT teams, along with professional service fees, depreciation, amortization, and insurance costs. As we scale operations, we anticipate additional expenditures for personnel hiring, infrastructure development, and compliance-related activities. These investments are necessary to support our anticipated growth and ensure operational efficiency.
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General and Administrative Expenses. G&A expenses primarily comprise personnel-related costs for our executive, legal, finance, human resources, and IT teams, along with professional service fees, litigation expenses, depreciation, amortization, and insurance costs.
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Research and Development Expenses. R&D expenses primarily include salaries and share-based compensation for our engineers and scientists, as well as raw material costs for experimental development, utility expenses, and depreciation costs related to R&D activities. As we continue to invest in new product development, advanced battery technologies, enhanced product functionality, testing, and process improvement, we expect R&D expenditures to increase in absolute dollar terms. These R&D investments are critical to maintaining technological leadership and delivering next-generation battery solutions to the market.
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Research and Development Expenses. R&D expenses primarily include salaries and share-based compensation for our engineers and scientists, as well as raw material costs for experimental development, utility expenses, and depreciation costs related to R&D activities.
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Other income and expenses consist primarily of fair value changes of the warrant liability and the convertible loan described in Note 14 to the Financial Statements included herein (the "Convertible Loan"), these instruments are highly sensitive to fluctuations in our stock price. This section also includes interest expense associated with our debt financing arrangements, interest income earned on our cash balances, and foreign currency gains and losses.
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Other income and expenses consist primarily of fair value changes and foreign exchange (loss) gain. Fair value changes were primarily attributable to the convertible loan described in Note 14 to the unaudited consolidated financial statements included herein (the "Convertible Loan"), as these instruments are highly sensitive to fluctuations in our stock price. Foreign exchange (loss) gain consists of losses and gains from remeasurement of the foreign-currency-denominated functional currency. This section also includes interest expense associated with our debt financing arrangements, and interest income earned on our cash balances.
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During the six months ended June 30, 2026, the Company observed a moderation in global electric vehicle demand growth, primarily driven by the expiration of government incentive programs and shifting regulatory frameworks in key regions. Our revenue and delivery schedules were also impacted by broader macroeconomic headwinds, including geopolitical instability and evolving tariff structures, which contributed to market volatility and influenced customer procurement cycles.
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Our revenue and delivery schedules were also impacted by broader macroeconomic headwinds, including geopolitical instability and evolving tariff structures, which contributed to market volatility and influenced customer procurement cycles.
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Our gross margin profile remains subject to external pressures, including inflationary trends in raw material pricing, duties and tariffs, and elevated logistics and freight expenses resulting from ongoing global supply chain disruptions and geopolitical conflicts. While we continue to implement cost-mitigation strategies, these macroeconomic factors, combined with a phase-out of regional subsidies for electric vehicle adoption, have contributed to a challenging environment for near-term profitability across the battery manufacturing sector.
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Our gross margin profile is subject to external pressures, including inflationary trends in raw material pricing, duties, taxes, and tariffs, and elevated logistics and freight expenses resulting from ongoing global supply chain disruptions and geopolitical conflicts. China has imposed a 2% consumption tax on lithium battery products sold in China effective September 1, 2026 and will increase the tax to 4% effective September 1, 2027. China also reduced the value added tax export rebate rate for specified lithium battery products from 9% to 6%, effective April 1, 2026 and will eliminate the export rebate effective January 1, 2027. While we continue to implement cost-mitigation strategies, these macroeconomic factors, combined with a phase-out of regional subsidies for electric vehicle adoption, have contributed to a challenging environment for near-term profitability across the battery manufacturing sector.
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Research and development expenses for the three months ended June 30, 2026 increased by $1.1 million, or 14.8%, compared to the same period in 2025. The increase was primarily due to an increase in labor costs as we expanded our investment in new product development.
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Research and development expenses for the three months ended September 30, 2026 increased by $605 thousand, or 7.8%, compared to the same period in 2025. The increase was primarily due to an increase in labor costs as we expanded our investment in new product development.
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Subsidy income decreased from $995 thousand for the three months ended June 30, 2025 to $15 thousand in the current-year period. The amounts are the one-time awards granted by the Chinese government in 2025 and 2026.
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Subsidy income decreased from $44 thousand for the three months ended September 30, 2025 to $9 thousand in the current-year period. The amounts are the one-time awards granted by the local governments in 2025 and 2026.
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Foreign exchange gain decreased from a gain of $7.2 million for the three months ended June 30, 2025 to a loss of $4.7 million for the three months ended June 30, 2026. The foreign exchange loss for the three months ended June 30, 2026 was primarily due to unfavorable changes in the U.S. dollar and Euro exchange rates relative to the changes in RMB exchange rates.
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Foreign exchange loss increased from a loss of $1.9 million for the three months ended September 30, 2025 to a loss of $3.8 million for the three months ended September 30, 2026. The foreign exchange loss for the three months ended September 30, 2026 was primarily due to unfavorable changes in the U.S. dollar and Euro exchange rates relative to the changes in RMB exchange rates.
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Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025
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Comparison of the Nine Months Ended September 30, 2026 to the Nine Months Ended September 30, 2025
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Our revenues for the six months ended June 30, 2026 decreased by $60.0 million, or 28.8%, compared to the same period in 2025. The decrease was primarily driven by a 24.3% reduction in sales volume from approximately 947.2 MWh for the six months ended June 30, 2025 to approximately 717.2 MWh for the same period in 2026, and a $2.7 million tariff refund issued to a U.S. customer recorded as a reduction to our revenue in the current period.
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Our revenues for the nine months ended September 30, 2026 decreased by $137.4 million, or 41.5%, compared to the same period in 2025. The decrease was primarily driven by a 37.4% reduction in sales volume from approximately 1,448.9 MWh for the nine months ended September 30, 2025 to approximately 906.8 MWh for the same period in 2026, and $2.7 million in tariff refunds were issued to U.S. customers recorded as a reduction to our revenue in the current period.
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The decrease in sales volume was primarily the result of evolving regulatory and geopolitical dynamics, including the Indian and Korean markets, demand shift towards lower cost products in India, and OEM-caused platform delays in the transportation and mining sectors in Europe and APAC, respectively. The decrease in U.S. sales versus the prior year period were primarily due to our largest customer bringing product into 2025 as a result of uncertainty around tariff outcomes.
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During the nine months ended September 30, 2026, the decrease in sales volume reflected weaker sales across Europe and APAC as the result of softer end-market demand for heavy-duty trucks, port equipment, and heavy mining equipment, which led to reduced orders from several of our long-standing customers, across Europe and APAC. Demand continued to be adversely affected by the commercial vehicles evolving regulatory and geopolitical dynamics, including the Indian and Korean markets, demand shift towards lower cost products in India. The decrease in U.S. sales versus the prior year period was primarily due to our largest customer bringing product into 2025 as a result of uncertainty around tariff outcomes.
Previous wording
During the three months ended June 30, 2026, the Company observed a moderation in global electric vehicle demand growth, primarily driven by the expiration of government incentive programs and shifting regulatory frameworks in key regions. Our revenue and delivery schedules were also impacted by broader macroeconomic headwinds, including geopolitical instability and evolving tariff structures, which contributed to market volatility and influenced customer procurement cycles.
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Our revenue and delivery schedules were also impacted by broader macroeconomic headwinds, including geopolitical instability and evolving taxes and tariff structures, which contributed to market volatility and influenced customer procurement cycles.
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Our cost of revenues for the six months ended June 30, 2026 decreased by $30.2 million, or 22.7%, compared to the same period in 2025, primarily due to the decrease in sales volumes and the one-time $4.3 million recognition of tariff refunds which is partially offset by higher raw material prices.
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Our cost of revenues for the nine months ended September 30, 2026 decreased by $69.9 million, or 34.1%, compared to the same period in 2025, primarily due to the decrease in sales volumes and the one-time $4.4 million recognition of tariff refunds which is partially offset by higher raw material prices.
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Our gross margin profile remains subject to external pressures, including inflationary trends in raw material pricing, duties and tariffs, and elevated logistics and freight expenses resulting from ongoing global supply chain disruptions and geopolitical conflicts. While we continue to implement cost-mitigation strategies, these macroeconomic factors, combined with a phase-out of regional subsidies for electric vehicle adoption, have contributed to a challenging environment for near-term profitability across the battery manufacturing sector.
Current wording
Our gross margin profile is subject to external pressures, including inflationary trends in raw material pricing, duties, taxes, and tariffs, and elevated logistics and freight expenses resulting from ongoing global supply chain disruptions and geopolitical conflicts. China has imposed a 2% consumption tax on lithium battery products sold in China effective September 1, 2026 and will increase the tax to 4% effective September 1, 2027. China also reduced the value added tax export rebate rate for specified lithium battery products from 9% to 6%, effective April 1, 2026 and will eliminate the export rebate effective January 1, 2027. While we continue to implement cost-mitigation strategies, these macroeconomic factors, combined with a phase-out of regional subsidies for electric vehicle adoption, have contributed to a challenging environment for near-term profitability across the battery manufacturing sector.
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Research and development expenses for the six months ended June 30, 2026 increased by $1.7 million, or 10.7%, compared to the same period in 2025. The increase was primarily due to a $1.4 million increase in labor costs as we expanded our investment in new product development.
Current wording
Research and development expenses for the nine months ended September 30, 2026 increased by $2.3 million, or 9.7%, compared to the same period in 2025. The increase was primarily due to a $2.0 million increase in labor costs as we expanded our investment in new product development.
Previous wording
Subsidy income decreased from $2.4 million for the six months ended June 30, 2025 to $18 thousand in the current-year period. The amounts are the one-time awards granted by the Chinese government in 2025 and 2026.
Current wording
Subsidy income decreased from $2.5 million for the nine months ended September 30, 2025 to $27 thousand in the current-year period. The amounts are the one-time awards granted by the local governments in 2025 and 2026.
Previous wording
Foreign exchange gain decreased from $10.9 million for the six months ended June 30, 2025 to a loss of $11.6 million for the six months ended June 30, 2026. The foreign exchange loss for the six months ended June 30, 2026 was primarily due to unfavorable changes in the U.S. dollar and Euro exchange rates relative to the changes in RMB exchange rates.
Current wording
Foreign exchange gain decreased from $9.0 million for the nine months ended September 30, 2025 to a loss of $15.4 million for the nine months ended September 30, 2026. The foreign exchange loss for the nine months ended September 30, 2026 was primarily due to unfavorable changes in the U.S. dollar and Euro exchange rates relative to the changes in RMB exchange rates.
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Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Our cost of revenues for the three months ended September 30, 2026 decreased by $38.1 million, or 52.7%, compared to the same period in 2025, primarily due to the decrease in sales volumes.
Current report — wording carried from elsewhere
Impairment Loss of Long-lived Assets
Current report — wording carried from elsewhere
Impairment Loss of Long-lived Assets
Current report — wording carried from elsewhere
We have evaluated whether the plans described above are sufficient to alleviate the substantial doubt about our ability to continue as a going concern. Under this evaluation, we assessed whether it is probable that (1) the plans will be effectively implemented within one year after the date these financial statements are issued, and (2) when implemented, the plans will mitigate the conditions and events that raise substantial doubt. The effectiveness of management plans to address liquidity risks depends in part on factors outside the Company’s control, including customer demand, customer order commitments, operating performance, lender decisions and capital market conditions. As of the date of this assessment, the cost-reduction program had not been fully implemented, and future refinancing or additional financing sufficient to meet the Company’s liquidity requirements cannot be deemed probable.
Current report — wording carried from elsewhere
Cash Flows used in Investing Activities
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Compliance with these standards requires continuous investment in manufacturing processes, material sourcing, and waste disposal practices to ensure adherence to environmental mandates across multiple jurisdictions.
Previous report — wording carried elsewhere
Changes in Fair Value of Convertible Loan
Previous report — wording carried elsewhere
For the three months ended June 30, 2026, we recorded a loss of $5.8 million due to the change of the fair value of the Convertible Loan before it was settled on May 28, 2026, see Note 14 – Convertible Loan measured at fair value.